Is basketball scoring a random walk?

by  Tyler Cowen in

Not when there’s a strike on!  Otherwise, maybe so, as Gabel and Redner report (pdf):

We present evidence, based on play-by-play data from all 6087 games from the 2006/07–2009/10 seasons of the National Basketball Association (NBA), that basketball scoring is well described by a weakly-biased continuous-time random walk. The time between successive scoring events follows an exponential distribution, with little memory between different scoring intervals. Using this random-walk picture that is augmented by features idiosyncratic to basketball, we account for a wide variety of statistical properties of scoring, such as the distribution of the score difference between opponents and the fraction of game time that one team is in the lead. By further including the heterogeneity of team strengths, we build a computational model that accounts for essentially all statistical features of game scoring data and season win/loss records of each team.

For the pointer I thank Michelle Dawson.

The future of work

by  Tyler Cowen

“Online education will move from the add-on to the centerpiece,” Cowen told me. “Higher education will move towards a hybrid approach with top faculty teaching online, and motivational coaches working with students on a personal level.” Cowen sees the hybrid model making college education more affordable. He envisions new job opportunities in statistics, search, programming, and logic, “since you need people behind smart machines.” Cowen also envisions job growth in the motivational sector.

A link is here.

Claims about Iberia

by  Tyler Cowen in

In Portugal, non-financial companies (NFCs) have debt that is 16 times their pre-interest profit. An interest rate of little over 6 per cent would wipe that profit out. In Spain the numbers are 12 times and 8 per cent, respectively. So its entire NFC sectors are junk – a designation that kicks in at a ratio of about 10 times. The somewhat less dire Spanish ratio is exactly where Japan was in 1995-96. Japan had no real GDP growth between 1996 and 2002 – an ominous precedent – and finally emerged into growth again after a massive bank-debt write-off in spring 2003.

Here is more.

Assorted links

by  Tyler Cowen

1. When will the world have its first trillionaire?  In real terms I say never, marginal tax rates will rise to capture the rents, one way or another.

2. What’s in Fred Hersch’s iPod?  Very good post, via Jeff.

3. “What is to be done about this cacophony of copulation?”

4. About what is Bryan optimistic and pessimistic?

5. The 1987 Robocop commercials (video).  And the new TLS blog.

China estimate of the day

by  Tyler Cowen in

As a result, the IMF estimates, China’s domestic loans equaled 173% of GDP at the end of June 2011, which the IMF called “well above the levels of credit” for developing countries of similar income level as China.

Here is more.  And in the west, via Alex Kowalski:

In dozens of rural villages in China’s western provinces, one of the first things primary school kids learn is what made their education possible: tobacco.

“On the gates of these schools, you’ll see slogans that say ‘Genius comes from hard work — Tobacco helps you become talented,’” said Xu Guihua, secretary general of the privately funded lobby group Chinese Association on Tobacco Control. The schools are sponsored by local units of China’s government-owned monopoly cigarette maker. “They are pinning their hopes on young people taking up smoking.”

Cognitive style influences belief in God

by  Tyler Cowen

From Shenhav A, Rand DG, Greene JD:

Some have argued that belief in God is intuitive, a natural (by-)product of the human mind given its cognitive structure and social context. If this is true, the extent to which one believes in God may be influenced by one’s more general tendency to rely on intuition versus reflection. Three studies support this hypothesis, linking intuitive cognitive style to belief in God. Study 1 showed that individual differences in cognitive style predict belief in God. Participants completed the Cognitive Reflection Test (CRT; Frederick, 2005), which employs math problems that, although easily solvable, have intuitively compelling incorrect answers. Participants who gave more intuitive answers on the CRT reported stronger belief in God. This effect was not mediated by education level, income, political orientation, or other demographic variables. Study 2 showed that the correlation between CRT scores and belief in God also holds when cognitive ability (IQ) and aspects of personality were controlled. Moreover, both studies demonstrated that intuitive CRT responses predicted the degree to which individuals reported having strengthened their belief in God since childhood, but not their familial religiosity during childhood, suggesting a causal relationship between cognitive style and change in belief over time. Study 3 revealed such a causal relationship over the short term: Experimentally inducing a mindset that favors intuition over reflection increases self-reported belief in God.

The link is here and for the pointer I thank Razib Khan on Twitter.

Guinea pig repo markets in everything the culture that is Swiss

by  Tyler Cowen in

Swiss animal lover Priska Küng runs a kind of matchmaking agency — for lonely guinea pigs that have lost their partners. She lives with around 80 of the furry, squeaky little creatures, in addition to six cats, a number of rabbits, hamsters and mice in the village of Hadlikon, some 30 kilometers from Zürich.

Küng, 41, rents out her guinea pigs, a service that has been in high demand in the Alpine nation ever since animal welfare rules were tightened up a few years ago. Switzerland has forbidden people from keeping lone guinea pigs because the animals are sociable and need each other’s company.

As a result, the sudden death of a guinea pig, shocking enough in itself, can also place the hapless owners outside the law if they only had two of the pets.

Here’s the efficiency point, concerning liquidity premia and carrying costs and inventory cycles:

Without her rent-a-guinea pig service, the owner would have to purchase a new, probably younger guinea pig as a companion to the ageing survivor, whose eventual death would force the purchase of yet another guinea pig, locking the owner into an endless cycle of guinea pig purchases in order to adhere to Swiss law — even though he or she may only ever have wanted one guinea pig in the first place.

As you might expect from the Swiss, it’s done through a repo:

She takes 50 Swiss francs (€41) for a castrated male and 60 francs for a female, “as a deposit,” Küng explains. In effect, she sells the animals but pays back half the purchase price when they are returned

Attention all you hedge fund readers: if these people can arbitrage and convexify their guinea pig market, you’d better not bet against their currency peg.

The full story is here and hat tip goes to the excellent Robert Cottrell.

Greece and Benford’s Law

by  Tyler Cowen

To detect manipulations or fraud in accounting data, auditors have successfully used Benford’s law as part of their fraud detection processes. Benford’s law proposes a distribution for first digits of numbers in naturally occurring data. Government accounting and statistics are similar in nature to financial accounting. In the European Union (EU), there is pressure to comply with the Stability and Growth Pact criteria. Therefore, like firms, governments might try to make their economic situation seem better. In this paper, we use a Benford test to investigate the quality of macroeconomic data relevant to the deficit criteria reported to Eurostat by the EU member states. We find that the data reported by Greece shows the greatest deviation from Benford’s law among all euro states.

The full article is here, hat tip goes to Chris F. Masse.

The magic of compound interest?

by  Tyler Cowen in

Because thanks to an eccentric New York lawyer in the 1930s, this college [Hartwick] in a corner of the Catskills inherited a thousand-year trust that would not mature until the year 2936: a gift whose accumulated compound interest, the New York Times reported in 1961, “could ultimately shatter the nation’s financial structure.”

The real rate of compound interest may or may not in the long run exceed the rate of economic growth, so the size of the trust could be enormous in the 29th century but still small or mid-sized relative to the size of the economy.

The problem becomes especially acute when existential or catastrophic risk is significant.  Long-term savers then earn a higher risk premium and the compounding is more intense.  It is possible that the rate of return on these investments — if the world survives — is quite high relative to the rate of economic growth.  In effect, existential risk means the long-term savers will rule the world, if there is a world to rule of course.

The article is here — interesting throughout — and for the pointer I thank Umung Varma.

Addendum: Robin Hanson offers comment.

About what am I optimistic and pessimistic?

by  Tyler Cowen

Rahul asks:

Reading Tyler’s views on the great stagnation, American deficit, American politics, the Euro, Greece, Medicare, Social Security, climate issues etc. I hardly see a sliver of optimism anywhere.

What things is Tyler really optimistic about?

Beware the fallacy of mood affiliation!  (Choosing a view to correspond to an overall desired or appropriate mood.)  And don’t overrate the importance of the public sector.  A few points:

1. I am a utility optimist and a revenue pessimist; better that than the other way around.

2. Many readers of TGS neglect the last section of the book which notes that a) the great stagnation is going to end, and b) we’ve already made the critical breakthrough, namely internet/computers/smart machines, we just haven’t seen most of the gains yet and they may take longer than most people expect.  I’ll be writing more on this.

3. I am a pessimist about the euro but not Europe.  The continent will do fine once it gets past this mess, albeit with some suffering along the way.

4. I am optimistic about most social issues, such as the increasing felicity of marriage.

5. I am optimistic about how well immigration will go.

6. I am optimistic about human cognition and the Flynn effect.

7. I am optimistic about the future progress of medical care, albeit with some lags.

8. I am increasingly optimistic about the WMD terrorism issue, though I am not sure if I am in absolute terms an optimist on this issue.  The terror groups don’t seem very robust or well-organized, and that may be for reasons which are intrinsic to their operations and ideology.

9. I am optimistic about most developing countries and this is a significant issue.

10. I am a pessimist about climate change and biodiversity, though most other environmental issues seem fine or at least manageable and possibly improving.

11. I am a pessimist about how we treat animals.

12. I am an optimist about restaurants in northern Virginia.